The combined Social Security tax rate was _____ up to incomes of _____. a. 15.3 percent; $87,000 b. 14.2 percent; $91,000 c. 11.7 percent; $83,500 d. 12.8 percent; $88,000 ANSWER a
Date: September 9th, 2020
Sandy’s uncompensated demand for candy is given by the equation Q = 15/p, where Q is the quantity of candy and p is the price. When the price of candy rises from $1 to $3, the change in consumer surplus is A) $16.5. B) -$20. C) -$15. D) $15. ANSWER A
Date: September 9th, 2020
An incumbent announces it will significantly increase output in the next period, but only has contracts for the amount produced this period. The announcement is a A) credible threat. B) non-credible threat. C) commitment. D) mixed strategy. ANSWER B
Date: September 9th, 2020
Governments impose excise taxes on goods that have inelastic demand, such as cigarettes, more often than in other cases. Why? What will be an ideal response? ANSWER Imposing an excise tax reduces the supply of the good, reducing equilibrium quantity and raising the price. If demand is elastic, taxes will tend to reduce quantity […]
Date: September 9th, 2020
An individual has an initial wealth of $35,000 and might incur a loss of $10,000 with probability p. Insurance is available that charges $gK to purchase $K of coverage. What value of g will make the insurance actuarially fair? If she is risk averse and insurance is fair, what is the optimal amount of coverage? […]
Date: September 9th, 2020
Demand is given by QD = 6000 – 50P. Domestic supply is QS = 25P. Foreign producers can supply any quantity at a price of $40. a. If foreign producers can sell in the domestic market, what is the equilibrium price? What is the equilibrium quantity? How much is sold by domestic and foreign producers, […]
Date: September 9th, 2020
Two-part pricing allows the monopoly firm to capture all of the potential consumer surplus generated by the sale of its product. Indicate whether the statement is true or false ANSWER False. This is only the case if all consumers are identical. If consumers differ, no single price can capture all the consumer surplus.
Date: September 9th, 2020
What is the Degree of Operating Leverage? What will be an ideal response? ANSWER It is an elasticity formula which calculates the percentage change in profit resulting from some percentage change in the level of operation (output and sales).
Date: September 9th, 2020
Cindy’s attitudes towards risk are summarized by the utility function U(w) = . Cindy has an initial wealth of $100. There is a 10% chance that her home will sustain flood damage next year costing her $40 in repairs. What is the most she will pay to for a full $40 of flood insurance? […]
Date: September 9th, 2020
The Social Security program is like a private pension plan in that _____. a. it is a pay-as-you-go system b. it is voluntary c. benefits are a function of earlier contributions d. you have a legal right to your benefits ANSWER c
Date: September 9th, 2020
